The Federal Reserve's hawkish guidance caused the Dow Jones Industrial Average to plummet by a thousand points, marking its longest consecutive decline since 1974. U.S. Treasuries, gold, and the cryptocurrency market also collapsed

On December 18, Wednesday, the Federal Reserve's December interest rate decision is coming. This meeting has caused a huge shock in the market.

Before the Federal Reserve Decision Announcement

Before the Federal Reserve's decision statement was released, U.S. stocks rose during the day, U.S. Treasury yields fell during the day, and gold declined:

• The S&P 500 index rose 0.19%, the Dow Jones Industrial Average rose 170 points, an increase of 0.39%, and the Nasdaq rose 0.19%.
• The yield on the 10-year U.S. Treasury bond fell by 0.99 basis points to 4.3889%; the yield on the 2-year U.S. Treasury bond fell by 2.12 basis points to 4.2236%.
• The U.S. dollar index fell below 107, approaching the flat position near 106.950.
• Spot gold fell 0.43%, nearing the daily low of $2633.14.

After the Federal Reserve Decision Announcement

The latest dot plot shows that Federal Reserve officials have significantly raised the median target range for future policy rates, and inflation expectations for next year and the year after have also been significantly raised.

Among them, the median target range for the policy rate at the end of 2025 is 3.9%, up from the September estimate of 3.4%; the expected median for the end of 2026 is 3.4%, up from the September estimate of 2.9%; the expected rate for the end of 2027 is 3.1%, previously estimated at 2.9%; the expected long-term federal funds rate is 3.0%, previously estimated at 2.9%.

Regarding inflation, the expected core PCE inflation for 2025 is 2.5%, previously estimated at 2.2%; the expected core PCE inflation for 2026 is 2.2%, previously estimated at 2.0%.

Federal Reserve officials provided hawkish guidance for the future, indicating that there will only be two rate cuts next year, leading to a short-term rise in U.S. Treasury yields and the dollar, while gold prices and U.S. stocks plummeted:

• All three major U.S. stock indices fell, with the Nasdaq 100 index down 0.8%, the biotechnology index down 1.5%, and the banking index down 0.7%.
• The yield on the 2-year U.S. Treasury bond rebounded nearly 8 basis points in the short term, rising about 4 basis points during the day, approaching 4.29%. The yield on the 10-year U.S. Treasury bond rebounded 4 basis points in the short term, rising from a daily low of around 4.38% to a daily high of 4.4245%.
• The Bloomberg Dollar Index rose sharply from around 1290 points to above 1295.40 points, with an overall increase of about 0.5% during the day.
• Gold fell sharply by $15, refreshing the daily low to $2621.15, down about 1% during the day.

Powell's Press Conference

Federal Reserve Chairman Jerome Powell stated during the press conference that the December decision statement means that we are at or near a slowdown in the pace of rate cuts or a pause in rate cuts. We are closer to a neutral rate. In the process of adjusting rates, we are in a new phase. We need to see progress on inflation going forward and will not overreact to a few months of inflation data. According to existing legislation on Capitol Hill, the Federal Reserve is not allowed to hold Bitcoin, and the Federal Reserve is not seeking to change the law to be able to hold Bitcoin.

During Powell's press conference, the declines in U.S. stocks, U.S. Treasury bonds, gold, and Bitcoin all expanded to varying degrees, while the dollar's gains increased:

• The S&P 500 index fell about 1%, the Dow Jones fell about 400 points, with the decline expanding to 0.9%, the Nasdaq fell 1.1%, the Nasdaq 100 index fell 1.3%, the Russell small-cap index fell 1.2%, the biotechnology index fell 2.6%, the semiconductor index fell 0.8%, and the banking index fell 1.8% Tesla fell 2.8%, and Apple fell 0.67%.
• The yields on U.S. 2, 3, and 5-year Treasury bonds increased by 10 basis points.
• The Bloomberg Dollar Index rose about 0.8%, breaking through the 1300-point mark. The euro fell 1.1% against the dollar, reported at 1.0376. The British pound fell 1% against the dollar, reported at 1.2582.
• Spot gold fell 1.4%, refreshing its daily low to below $2610 during Federal Reserve Chairman Jerome Powell's speech.
• Bitcoin fell over 5%, dropping below $101,000.

After the Press Conference

After Powell's press conference, the decline in U.S. stocks widened. Although there was a brief rebound before the close, they ultimately approached the day's low.

The Dow Jones Industrial Average plummeted by over 1,000 points, marking its tenth consecutive trading day of decline, the longest losing streak since 1974. According to FactSet data, the Dow experienced 11 consecutive days of decline in 1974, and apart from that, the Dow Jones Industrial Average has never seen a decline for 10 days or longer.

At the close, the Dow fell more than 1,100 points, down nearly 2.6%, with components Goldman Sachs and Amazon dropping over 4%, the worst performers, while NVIDIA gave back all its intraday gains, closing down over 1%. The S&P 500 index fell nearly 3%, and the Nasdaq fell over 3.5%. Popular stock Tesla briefly fell 10%, closing down over 8%, and Broadcom fell over 6.9%.

Below is the performance of U.S. stocks on that day, which almost showed a straight-line decline after the Federal Reserve's statement:

Below is the yield trend of U.S. Treasury bonds on Wednesday:

Below is the dollar trend on Wednesday:

Below is the gold trend on Wednesday:

Below is the Bitcoin trend on Wednesday: